Credit Suisse Group (CS-N)

He would recommend staying away from this. If you have a choice of where to go in banking, the right place right now is the US. They are getting regulatory relief. Expects there will be more freedom in the US to make loans. Tax reform is very positive economic development for the US banks. Also, this bank has the old DLJ, and you would have to love the high-yield bond market, which is a big part of their product mix. He would rather be involved where investment banking is broader based with more exposure to equity.

He is very favourable on banks. He has been more focused in the US than in Europe, but money has been moving into the European market all year long. This was with the view that if the global economy is getting better, there is a little more leverage in the European markets. This bank is performing well. It broke out technically at $16. He believes we are in early stages of reflation around the world. This one is a great brand, and will participate.

This has issues on multiple levels. They’ve had to raise capital twice in the last 12-18 months. He has a real issue with financial institutions where there is a question about capital. Looking at their lines of business, they are particularly concentrated in fixed income, relative to their peers. Not sure of being a huge fan of the high-yield area. The RNBS (mortgage-backed bonds?) space needs a very particular catalyst. RNBS is well below normal because of the function of Dodd Frank requiring banks to have skin in the game when they issue mortgages.

It went on his watch list about 6 months ago. It was very badly beaten up. But it went up over $10 so is not of interest right now. It is an interesting play because he thinks the Euro has a lot of upside. You could also look at some Greek banks. LYG-N is not quite cheap enough for him. The British government has sold off its entire stake in it.

Chart looks like it may be breaking a downtrend and putting in a bit of a bottom. The catalyst for that bottom might be the change in the CEO. Stock doesn’t look too bad and looks like it is attempting to breaking the downtrend. He would watch it for a little while to make sure it is definitively breaking the downtrend line.

Unlike a lot of European banks, this had a bit of a flat year in 2013 with a lot of volatility. Banks, especially in Europe, are facing huge regulatory pressures to increase their capital and increase their liquidity in an environment where moving their top line is very, very challenging. There is not a lot of demand for loans. Valuation is particularly cheap and they are very well-positioned among investment banks as they have an attractive asset management arm, which is very profitable. This would not be his 1^st pick. Feels the European financials have run way ahead of themselves.

One of the issues with this one if the revenues from bonds came to an end as it is part of printing money. They are exiting a number of lines in investment banking. There is a lot of regulatory risk from ratios. You might want to consider IVZ-N.

A US bank is a better alternative. These are very highly risky investments.

Trading like other banks in the US at 7 or 8 times earnings. Need to increase their capital because they aim to get the Basil 3 and they tried to do it a couple of ways which have not been very successful. Have to bring down their cost/income ratio. Heavily weighted to investment banking and private client business, which are high-paying jobs. Need to cut the cost structure a lot more. Now is the time to buy banks because they are trading below book.

Any of the European banks that are constrained in terms of capital and are struggling to meet the terms of the Basel 3 Accord are in the process of trying to sell off assets. Even if this bank completes the sale of assets they are contemplating, they might struggle to hit the Basel 3 requirements.